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Date : 08/11/2004
Source: Department of Minerals and Energy
Title: Mlambo-Ngcuka: Address to the LPG Association


This year has seen a rebirth of LPG as an energy carrier. In June this year I told Parliament that my “Department is committed to the promotion of LPG which is a cleaner, safer and efficient burning energy source.”

LPG is a better burning fuel for cooking and heating. Its “fire” is easier to make and generally makes cooking a lot quicker. It does not generate smoke, dust or choking fumes like most other hydrocarbon fuels. Contrary to general belief, LPG is a lot safer to use, especially when used with appropriate equipment and appliances.

However in South Africa LPG has for many decades been a fuel for the rich and the elite and has therefore been very expensive. It comes out of the refinery at R3.00 per kg and it retails at R11 per kg with very little value added in between.

In my June budget speech I said that “Government will pilot a different approach to the retailing of LPG before the end of this financial year. Along with the pilot, an appropriate regulatory framework will be developed”.

Thanks to the cooperation of some members of the LPG association there are already a number of pilots running. So I thank you for that and for helping me to make good on at least one of my promises!

We need as a team, to quickly complete the pilot programmes that have commenced, initiate others in other areas and review the learnings from them. We need, as a team of government and private sector entities, ensure an active rollout programme before the end of 2005.

The introduction of LPG into the poor communities should have happened yesterday. Although Government has made significant inroads in battling energy poverty by electrifying communities that were previously left out of the system, there are still a number of communities that do not have access to cleaner and more modern fuels especially heating fuels.

Because these communities do not have access to these modern energy carriers, they cannot and do not benefit from the Government’s Free Basic Energy programme. These communities are the ones that are most deserving and yet they are doubly disadvantaged.

It is all systems go in 2004 for LPG pilots. In recent months some companies have launched LPG pilot schemes. We would like to see a lot more pilots, especially in areas, which are already concessioned for solar home systems. It is important from a public health and safety and from an environmental perspective that alternative fuels are found – especially in those communities that have no modern energy services. I would like to request that pilots also be run in these areas, we owe it to them.

Government is heartened by the enthusiasm displayed by the LPG industry in taking the challenge we face to heart and embarking upon pilot projects. We however need more. The more the merrier.

We need to set a timeframe for these pilots. I would like to hear from you about this. We need to make conclusions about the viability of the use of LPG by low-income households. We need the findings to see what, if anything, Government should do.

You have asked for switching subsidy to facilitate the switching from other fuels to LPG. I am not averse to that. Government will assist the industry to ensure maximum uptake of the fuel by households. The switching subsidy can only be justified when it’s been proven that LPG is an appropriate fuel for the poor and is affordable.

We have a number of options of how we could assist with switching. Firstly, I intend to speak to my colleagues at Cabinet to see what we can do from the fiscus. Eskom will also play a role in the both pilot and rollout programmes; in as far as the programme will assist them to manage the demand for electricity.

The EDC in the CEF stable have been mandated with development of energy companies. It is therefore imperative that they come on board as quickly as possible to assist both emerging players and to assist with the switching subsidy.

You have indicated a need for an affordable gas market price. Price Regulation, as you know is being investigated to make LPGas more affordable. We would prefer a market driven solution. But in all these years the market has not delivered to the communities. So unless that changes soon, we will have to do something.

Although there are significant benefits to the economy in moving households to LPG for thermal purposes, to assist Eskom in managing demand of Electricity, the priority is getting the unserved poor on board.

We are leaning towards an integrated approach, where a total household energy solution is provided, rather than just gas or just electricity. It may involve several energy carriers perhaps targetted at different market segments.

I would prefer to see easy access to appliances and equipment by the adoption of “open” systems. That is systems with interchangeable fittings and attachments so that economics of scale can be achieved. If government has to intervene it will almost certainly do so only on this basis.

In so far as there may be trade obstacles we are open to assisting you to talk to DTI about barriers and to jointly finding ways to tackle such obstacles.

In delivering LPG to the poor, safety and maintenance should never be compromised. We do not want to see our people using poorly maintained, unsafe equipment. We do not want replace killer paraffin stoves with gas bombs!

It is important that the LPG industry is transformed ensuring that the LPG Association is as broadly representative of all players as possible. We need to ensure HDSA’s participation not only in the tail end of the value chain but also across the whole value chain as prescribed by the Liquid Fuels Industry Charter.

In the provision of infrastructure, we would prefer decentralised infrastructure that promotes broad based empowerment. Our people should not just be consumers. They should also be owners of businesses too. The introduction of LPG into communities should come with jobs, manufacturing jobs and business opportunities.

In the delivery of the LPG, please allow for women participation. Women should not just be consumers of the product but active participants. This is a challenge to women too. We have WOESA representatives in your midst; they need to be involved in the delivery of a solution that in the main affect women.

We will work to try and ensure buy-in from Municipalities. With the help of the Municipalities we will identify the local government regulations that are obstacles to the uptake of LPG and eliminate them.

The Department would like to work with industry to formulate an effective communication plan, one aimed at educating the public about both the benefits and the dangers of LPG, if it is not used properly.

I thank you.

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